Japan Demographic Problems Solved by Robots?

Japan faces two major challenges: a need for economic growth and a shortage of labor. A lack of workers and consumers are causing demographic issues in Japan, which has one of the oldest populations in the world.

But Japanese firms have finally responded to Abe’s efforts in stimulating the economy, which has stagnated these last two decades.

A solution Japan seems to have embraced is the use of humanoid robots for factories, complementing the shortage of human workers. Glory Ltd, a developer and manufacturer of money handling machines and systems, is in the vanguard of this investment trend in robotics and automation.

Glory invested about 7.4 million yen (US$60,000) in 19 robots. They have eye-like sensors and arms to assemble made-to-order change dispensers, and work with the other 370 human workers.

“They aren’t human. But it’s as if I’m working with colleagues who do their work very well,” said one of the workers who has been there for four years.

There’s been a clear breakthrough in capital investment from Japanese companies these last few months. Indeed, investment rose by 11% from January to May from the previous quarter. If this pace is sustained, it will successfully meet Abe’s target of 70 trillion yen in 2015.

“We’re seeing companies spend more to enhance their productivity or renovate equipment,” said Ko Nakayama, head of the Bank of Japan’s economic statistics division. Their survey on Wednesday also showed Japanese companies plan to boost capital expenditure to the fastest pace in a decade.

Manufacturers are also preparing to catch the wave. Industrial robot makers Fanuc Corp and Sony announced spending worth 130 billion yen and 210 billion yen respectively to boost their production.

Robots: The Fix for Japan Demographic Problems?

Yukitoshi Funo, the BOJ’s new board member and former CEO of Toyota Motor Corp for 40 years, explains that Japanese companies usually take more time making investment decisions than US rivals. However, this seems to be changing.

“When you see these conservative companies increasing investment, you can expect (other) Japanese executives to ramp up spending,” he told reporters last Wednesday. “I think we’re at a critical juncture now.”

All of this is very promising for the success of “Abenomics”, Abe’s policy mix of loose money, fiscal stimulus and structural reforms to stimulate growth.

Abe hasn’t just talked about productivity growth due to artificial intelligence and robotics. He also offers subsidies. Abe set aside 2.2 billion yen for small and midsize companies to introduce robots and streamline operations.

This big change in corporate behavior is also a response to the low capacity of labor. Japan’s unemployment rate reached an 18 year low of 3.3%, which BOJ claims is very near full employment.

On the other hand, the number of unfilled jobs on the market are at a 20 year high. Japanese food maker Ajinomoto is one of the companies which has decided to overhaul its assembly line. The firm has streamlined packaging due to the struggles caused by Japan demographic problems.

“Shortage of labor is a structural problem Japan faces in the long run, given the ageing society,” said Kyuuichiro Sano, director of a trade ministry division in charge of technology. “They could be the answer,” he added.